Financial sustainability

Local finance first

Financing WASH services poses a serious and growing challenge in developing countries. Governments, civil society and communities are struggling with issues such as decentralisation, adequate fund allocation and cost recovery. Few countries have realistic and operational policies and strategies to enable sustainable financing for increased WASH service coverage, particularly for the poor.

To overcome these challenges, market forces must be recognised and appropriately considered, and small enterprises may have an opportunity to flourish when properly addressing water and sanitation in a locally regulated business sector. Governments have to prioritise WASH in their own budgets, using tax revenues for investment.

Key activities

The financial approach of the WASH Alliance is built on a variety of strategies to promote mechanisms and introduce models that create incentives for various stakeholders to contribute to the financing of WASH improvements.

• Rights based approach: through local lobby, advocacy and budget tracking, communities will be empowered to express their needs and demands to their local, regional and national authorities for adequate budget allocation and use.
• Investment loans: small local enterprises will have the opportunity to flourish by properly addressing water and sanitation in a locally regulated business sector. We support private service WASH providers that own and manage WASH services privately, as a business, and whose investment costs need to be recovered from revenues.
• Local Finance First: we work towards models in which investment costs are covered as much as possible through local funding sources, e.g. from consumers, public sector and private investors, through household contributions, recurrent tax revenue, fee systems, decentralized funds and loans from local finance institutions like banks and micro finance institutes. Operations and maintenance are always paid through local financing instruments.

Example: Budget tracking

Budget tracking is a possible way forward towards accomplishing the objectives of the two leading principles of the FIETS: financial sustainability and institutional sustainability. Budget tracking is needed to make sure funds from the national level will reach the right beneficiaries. Lobby at national and international level should convince public and private stakeholders to invest in and create an enabling environment for WASH services.

PETS

Public Expenditure Tracking Surveys (PETS) are the most common form of budget tracking used by the World Bank. Here you can download a document about PETS and budget tracking. This Briefing note was written by IRC (International Water and Sanitation Centre). It was presented and discussed with DWA members during the Workshop: Finance for WASH, Learning from Practice, held in Leiden, The Netherlands, February 2012.